Page 6 - LatAmOil Week 10 2020

LatAmOil COMMENTARY LatAmOil
 Since the start of 2020, many companies and investors, with BlackRock and BP in the fore- front, have declared that climate risk is invest- ment risk, and that they will put sustainability and emissions reduction at the forefront of their strategies.
Demand
Global oil demand fell by 2.5mn bpd on the year in the first quarter, or around 2.5%, the IEA estimated in its report, as coronavirus fears cut travel and economic activity. China accounted for 1.8mn bpd of that fall.
The IEA has now reduced its oil demand forecast, with this decreasing in 2020 before sharply rebounding in 2021. From then on, growth will be sluggish until 2025.
For this year, demand is now set at 99.9mn bpd, down around 90,000 bpd from 2019. This is a sharp downgrade from the IEA’s forecast in February, which predicted global demand would grow by 825,000 bpd in 2020.
Now that prices have fallen, market observ- ers will now be anxious to see them rebound, although this could take months.
“Looking ahead, prices will eventually rebound, as current levels are below the mar- ginal cost of production for the majority of operators, including all the US shale basins. Sub-$40 isn’t sustainable for any longer than a short period, most likely just months,” said Jack Allardyce, oil and gas research analyst at Can- tor Fitzgerald Europe. “An extended period of low prices would generally be expected to have a positive impact on demand, although the cur- rent picture is clouded given the growing coro- navirus outbreak.”
MEXICO
Mexico hopes to draw $92bn in private energy investments
Commitments
While the oil price shock and the Saudi-Rus- sian production conflict are supply prob- lems, demand may refuse to rise on low prices because of lower economic activity caused by the coronavirus.
Looking ahead, the IEA said the short term would ultimately depend on how quickly gov- ernments move to contain the coronavirus out- break, how successful their efforts are, and what lingering impact the global health crisis has on economic activity. Birol’s comments bring into focus the fact that energy companies’ commit- ments to reduce emissions and combat climate change are vulnerable to receiving less invest- ment and operational focus. ™
Oil, gas and renewable energy are all vulnerable (Photo: Morningstar Corp.)
PRIVATE sector operators in Mexico are report- edly prepared to make nearly $92bn worth of new investments in government-run projects, according to a Reuters report.
The proposed investment package could give a significant boost to the government’s national energy plan, the news agency said.
The investment plan was reportedly sub- mitted to the government on Monday by the Mexican Business Council and the CCE, the country’s largest business lobby.
Reuters said that it had seen a document outlining the investment package, and Mexi- co’s Energy Minister Rocio Nahle told the news agency that she and President Andres Manuel Lopez Obrador would be analysing the plan in the coming days. She was speaking after the
president said that the country’s new energy plan could be ready within around 10 days.
The government’s new national energy plan will list a total of 275 projects in need of investment during the 2020-2024 period. It will include schemes related to power generation, storage and transportation, as well as natural gas exploration and production, among others, Reuters said.
Mexico City recently held talks on the new
plan with several international oil companies (IOCs), including Royal Dutch Shell, France’s
Engie and Italy’s Enel. Alfonso Romo, the presi-
dent’s chief of staff, told reporters during a news conference last week that the government was reviewing the energy plan and which projects
will be part of it, Reuters said. 
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w w w . N E W S B A S E . c o m Week 10 12•March•2020